PLEASE READ BEFORE POSTING: Hello Forumites! In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non-MoneySaving matters are not permitted per the Forum rules. While we understand that mentioning house prices may sometimes be relevant to a user's specific MoneySaving situation, we ask that you please avoid veering into broad, general debates about the market, the economy and politics, as these can unfortunately lead to abusive or hateful behaviour. Threads that are found to have derailed into wider discussions may be removed. Users who repeatedly disregard this may have their Forum account banned. Please also avoid posting personally identifiable information, including links to your own online property listing which may reveal your address. Thank you for your understanding.
We're aware that some users are experiencing technical issues which the team are working to resolve. See the Community Noticeboard for more info. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Sell a flat (leasehold) or a house (freehold) to fund new property?

Options
Chris_derby
Chris_derby Posts: 51 Forumite
Fourth Anniversary 10 Posts
edited 8 October 2020 at 2:15PM in House buying, renting & selling
Hi,

My wife has a flat (leasehold) in her name that she use to live in before she moved in with me a few years ago. We’ve rented the flat out ever since and it has been paying for itself and making a little profit while we’ve been living in my house (freehold) in my name.

A property has come up for sale that we have wanted for years and we’re just wondering what to do with our current properties to fund the new house as the mortgage will be much larger. Our options are:

1) Sell my house and keep my wife’s flat to carry on renting it out. The equity will be enough for to put in the new mortgage.
2) Sell my wife’s flat and keep my house and rent it out. There’s probably not enough equity in the flat for the new mortgage so would probably have to take some out my house maybe.
3) Sell both my house and my wife’s flat, our mortgages combined should fund the new house.

Financially option 1 is achievable, as the equity in my house would be a good chunk towards the new mortgage.

But the only thing that worries me is the flat is leasehold and I sort of feel that is dead money. Is that correct? What’s people’s thoughts and what’s the end game with leasehold properties? Once the mortgage has been paid off and lease is expired. Do we lose the money that has been put into the flat?

Thanks for the advice!

Comments

  • zagubov
    zagubov Posts: 17,937 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    edited 8 October 2020 at 2:40PM

    But the only thing that worries me is the flat is leasehold and I sort of feel that is dead money. Is that correct? What’s people’s thoughts and what’s the end game with leasehold properties? Once the mortgage has been paid off and lease is expired. Do we lose the money that has been put into the flat?

    Thanks for the advice!
    Depends on how many years there are left on the lease. You would pay the freeholder to extend the lease and you should do this before the remaining lease falls below about eighty years, as it then becomes very expensive.
    You can ask for a lease extension through a statutory route after you've owned the lease for two years and the price is capped.
    You could also ask the freeholder for an extension at any time but they could charge any price they liked.

    The main site covers this in detail.
    There is no honour to be had in not knowing a thing that can be known - Danny Baker
  • Slithery
    Slithery Posts: 6,046 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper Photogenic
    edited 8 October 2020 at 2:38PM
    1. You won't have the hassle of having to evict the tenant(s) before marketing the property. If they don't wish to leave then it could well take you until 2022 to get rid of them.
    2. You may be well be liable for the extra 3% SDLT for additional properties.
    3. You'll still need to evict the tenant before marketing the flat.
    I'd go for option 1.
  • Rambosmum
    Rambosmum Posts: 2,447 Forumite
    Part of the Furniture 1,000 Posts
    edited 8 October 2020 at 2:38PM
    The flat will likely be harder to sell, and you will have to either restrict your pool of potential buyers to landlords or try and get the tenants out ASAP, which unless you either pay them off or they are very, very nice is unlikely to be easy due to the 6 month notice period currently in place. 
    Selling the house will likely be faster and easier, as well as achieving you aim. 
  • ARH_2
    ARH_2 Posts: 109 Forumite
    Tenth Anniversary 100 Posts Combo Breaker
    There may be some Capital Gains Tax to pay on the sale of the flat which has been let out, which would further favour option 1, but might just be kicking the CGT can down the road. 
  • eddddy
    eddddy Posts: 17,951 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 9 October 2020 at 12:23AM
    A property has come up for sale that we have wanted for years and we’re just wondering what to do with our current properties to fund the new house as the mortgage will be much larger. Our options are:

    TBH, you're not in a great position to make an offer on that property - you're not even close to being proceedable.

    • You'd need to sell either one or two properties - and neither are even on the market yet. Let alone under offer. (Most sellers won't take offers seriously, unless the person making the offer already has their property under offer - along with a mortgage arranged in principle.)

    • Even worse - one of your properties has tenants in, who will probably need to be evicted before you can sell. (Unless you decide to sell it tenanted.)

    I guess you could try getting your property (or properties) on the market really quickly at very 'realistic' (i.e. cheap) prices, in order to get quick offers.  But if you're not quick enough, and your 'dream' house gets sold to somebody else before you're proceedable - what would you do?
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.8K Banking & Borrowing
  • 253K Reduce Debt & Boost Income
  • 453.4K Spending & Discounts
  • 243.7K Work, Benefits & Business
  • 598.5K Mortgages, Homes & Bills
  • 176.8K Life & Family
  • 257K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.